Real Estate Investing Coaching - Brian Gibbons

Mortgage Short Sale - An Exit Strategy or an Investment Opportunity?

Real Estate Short Sale and Mortgage Foreclosure Investments

Florida Foreclosure Rescue Law Signed May 28 2008 - wmbb.com

http://www.wmbb.com/gulfcoastwest/mbb/news.PrintView.-content-articles-MBB-2008-05-28-0013.html

ATTORNEY GENERAL McCOLLUM APPLAUDS SIGNING OF FORECLOSURE RESCUE FRAUD PREVENTION ACT INTO LAW
~New law provides important safeguards to help protect homeowners facing foreclosure~

TALLAHASSEE, FL – Attorney General Bill McCollum today applauded Governor Charlie Crist for signing The Foreclosure Rescue Fraud Prevention Act of 2008 into law. The legislation, which passed this session as HB 643 and was developed in part by members of the Attorney General’s Mortgage Fraud Task Force, will ensure that homeowners are properly informed about their rights before signing a contract with a foreclosure rescue entity in addition to other protections.

http://www.wmbb.com/gulfcoastwest/mbb/news.PrintView.-content-articles-MBB-2008-05-28-0013.html

Foreclosurees Up - In upscale as well as downtrodden neighborhoods around Marlborough and Hudson, foreclosures have been on the rise, causing anguish for the neighbors as well as the homeowners and stressing community services.

Foreclosures rise in area
By Catherine Buday
Wed Feb 06, 2008, 06:13 PM EST
Marlborough , Massachusetts USA
http://www.wickedlocal.com/hudson/news/business/x142945507#

Marlborough -  During one frigid day last month, Code Enforcement Officer Pam Wilderman took a call from an anxious Milham Street resident, who reported that an uncontrolled flow of water was pouring out from a neighbor’s home. - Wilderman, police and firefighters rushed to the scene, and the Water Department shut off the home’s water supply.   Later, Wilderman found out that the home – purchased seven years ago for $438,000 – had been foreclosed. Its former residents had left town without shutting off the water.  Today neighbors are facing the prospect of the home being abandoned and unkempt for a long time.

“Now there’s a potential mold problem,” Wilderman said. “Nobody can live in it until it’s been properly inspected and mitigated.”

In upscale as well as downtrodden neighborhoods around Marlborough and Hudson, foreclosures have been on the rise, causing anguish for the neighbors as well as the homeowners and stressing community services. Wilderman said she and other city services visited nine foreclosed properties in November alone.

“The problem is not just in French Hill,” she said. “It’s hitting all over the city. More and more people are just walking away from their homes when they’re foreclosed.” And until a new owner takes possession, she added, “nobody pays attention to the house.”

ForeclosuresMass, a web site that tracks foreclosures by community, reports that 111 Marlborough properties started the foreclosure process over the last six months. They include properties on Lincoln Street, Boston Post Road, Leoleis Drive, Priscilla Drive, McGee Avenue, Conrad Road and many other locations. ForeclosuresMass says that only 27 Massachusetts communities have more foreclosures than Marlborough.

In Hudson, ForeclosuresMass reports 28 properties have started the foreclosure process in the last six months, ranking it 65th in the state in the number of foreclosures. The properties are on Manning Street, Richard Road, Stow Court, Davis Road and other locations.

Banker and Tradesman, a publication that tracks real estate sales and foreclosures, reports that foreclosures nearly quadrupled in Marlborough between 2005 and 2007, to 59 last year. In Hudson, the number of foreclosures went from 1 in 2005 to 23 last year.

People who are watching the process blame financial institutions who misled unsophisticated buyers, and starry-eyed homeowners who bought more than they could afford with no money down.

Marlborough Savings Bank Vice President Jeff Dale said some recent immigrants have sought refinancing help from his bank after they secured risky mortgages from other sources. The bank has a loan officer, Paula DiGregorio, dedicated to helping Spanish-speaking people who are burdened with now-unmanageable mortgages.

“A lot of people got into sub-prime mortgage situations where they financed 95 or 100 percent of their properties,” Dale said. “Now, what they owe is equivalent to 105 or 120 percent of what their property is worth, and there’s very little we can do in cases like that.”

“We help as much as we can,” said Dale. “But if people are ‘upside down’ in a loan – owing more than a home is worth – we can’t do very much.”

Dale blames unscrupulous lenders who prey on lower-income people. “You can’t sell a $300,000 loan to someone who’s making $15,000 a year,” he said.

Vince Valvo of The Warren Group, which publishes Banker and Tradesman, said that foreclosure trends in Marlborough and Hudson mirror that around the state and the country. While all types of neighborhoods are hit, Valvo said that poorer neighborhoods tend to suffer the most.

“In communities with lower income residents and neighborhoods with older homes, we tend to see more of these foreclosures,” Valvo said. “Lower income residents have tended to take out riskier loans, that later reset at rates that they can no longer afford.”

But he added that people of all income levels have lost homes that they could not afford in the first place.

“People who decided to really stretch and buy the biggest house they could afford with as little down as possible are also in trouble,” Valvo said. “It could be the guy down the street driving the Lexus. He’s got a pool and a car but he’s in debt up to his ears.”

“It’s all part of the culture we have…that it’s our right to be living not just in a home, but a home with granite countertops, three bathrooms and tons of garage space,” Valvo said.

City Councilor Peter Juaire, whose ward includes some of Marlborough’s less wealthy neighborhoods, also agrees that the problem cuts across economic lines.

“Marlborough is a combination of white collar and blue collar, and we all know that the economy is not in the best condition,” said Juaire. “People are losing their jobs, after they bit off more than they could chew when they bought their homes. Some who bought an adjustable rate are now getting hit with a $300 a month increase. Their costs for gas and fuel are also going up. Everything’s going up except salaries.”

And both Wilderman and Juaire agree that foreclosures have led to more troubled properties and, in turn, troubled neighborhoods.

“Some people just walk away after their homes are foreclosed,” said Juaire. “If they don’t winterize, the pipes can break. Sometimes the home gets vandalized.”

Wilderman said she has seen first-hand how neighbors suffer from a neglected, foreclosed home. She took a complaint a year ago about a crowded home on Ridge Road, which she described as a “solid, middle class Cape Cod type neighborhood where everybody keeps up their yard.”

After the home changed hands, “there was suddenly a lot of traffic going in and out of it,” Wilderman said.

“I found out that the owner of the home had been able to purchase a $340,000 home with no money down,” she said. “The very next day he closed on another house on Barnard Road for $500,000, again with no money down.

“Now tell me that person didn’t know what he was doing. Both of those homes ended up in foreclosure within 18 months.”

Negotiating the path to keeping a home - When trouble arises, it’s important to know what to ask for, what your options might be

By David Fisher / The Bulletin

Paul Helikson stepped into the swirling snow on the steps of the Deschutes County Courthouse on a Thursday morning just before Christmas and barked out the legal singsong that brought an all-too-familiar end to a homeowner’s dreams.

Another day, another foreclosure auction.

As is usually the case, nobody raised a hand to bid on the little north Bend house, where the owner owed the bank more than $12,000 in unpaid mortgage payments. In fact, as is often the case, no potential bidders showed up at all.

So the house went back to the lender to join the county’s growing ranks of bank-owned houses for sale.

Helikson, a legal process server, works with most of the trustee companies that handle foreclosure operations in Central Oregon for the country’s major lenders, and business has been booming. The frequency of his legally scripted courthouse-steps auctions has gone from one every few days to about 15 a week as the real estate market has worsened, Helikson said. Still, it’s something that no one connected with the process enjoys.

“What’s worse than losing your house?” Helikson said. “Especially at this time of year.”

Losing the house is not always necessary, credit counselors say, even for people who face a temporary layoff, or a huge increase in their adjustable loan payments.

About 40 percent of the 37,000 homeowners who worked with mortgage counselors from the national Homeownership Preservation Foundation in the last three months of 2007 managed to hang onto their homes, said John Snyder, a homeownership specialist with the federally chartered NeighborWorks America program.

Still, the number of people needing help is growing.

More than 590 properties entered the earliest stages of the formal foreclosure process last year in Deschutes County, according to records on file in the Deschutes County Clerk’s Office, the highest number this decade and, even in proportion to the county’s growth, the highest rate of potential defaults per 1,000 housing units since the post-9/11 recession of 2002.

For stressed homeowners, negotiating a successful path through the arcane world of banks, defaults and debt relief can get complicated, NeighborWorks spokesman Doug Robinson said, but the first recommended steps are relatively simple.

“At 9 o’clock in the morning, you call your bank,” Robinson said. “At 9:15, you call your credit counselor.”

Doing it right

 

Katie Magana did it right.

Her husband, a Volvo mechanic who is paid only when cars are in his shop to work on, fell behind on the newlywed couple’s house payment late last year as car owners postponed their routine maintenance to save cash, and his income slid. When the bank issued a formal notice that it would foreclose — known as a pre-foreclosure notice — she didn’t hesitate.

She got on the phone. First, to the trustee who sent the notice. Then, when that bore little fruit, to the bank itself.

Magana found a bank official who agreed to waive any late payments if the Maganas use their tax refund, as planned, to bring their payments current later in the spring.

“They have a lot of people who are doing this, and it’s better for them to keep the money coming in,” Magana said. “They really don’t want the house.”

The important point to remember in any pre-foreclosure negotiation is just that, Robinson said — that it’s a negotiation.

Lenders often stand to lose money if they take a house back through a full foreclosure, either through the expense of the foreclosure process itself, or through the expense of having to sell a house that is no longer worth as much as its loan, or both, he noted, so they have an interest in keeping their borrowers in place if at all possible.

Still, the lenders want their money, so it’s important for borrowers to know what to ask for, and what their options might be.

The options

 

The options for most stressed borrowers will be a lot brighter if they contact their lender as soon as they see financial trouble ahead, Robinson said.

Lenders may be willing to negotiate a temporary suspension or reduction in payments for borrowers who have just lost a job or have suffered some other temporary setback, Robinson said, even before they have actually missed a payment. And most lenders have fairly standard and easy-to-use repayment programs for borrowers who have fallen only a payment or two behind.

Typically in those cases, the lenders will waive late fees and other penalties if the borrower comes up with a doable plan to, say, add a couple hundred dollars per month to their future payments to bring the loan current.

It’s important to ask lenders specifically about their repayment plans at that stage, Robinson said — they won’t always volunteer the fact that they have one, but most do. And it’s important to take note of exactly who was contacted, and to get a direct phone number for further contact.

Generally, lenders will be willing to use an off-the-shelf repayment plan if the missed payments can be repaid within a year, Robinson said. Anything beyond that — three or four months of missed payments, for example — are likely to result in the initiation of a formal foreclosure process, and negotiations that can grow much more complicated.

Depending on the borrower’s creditworthiness and ability to pay, and on the property’s value, lenders could opt to find a way to reduce the loan’s payments, either by extending its terms to as long as 40 years or by recasting it to remove a huge uptick in its adjustable payment schedule, said Catherine Williams, a vice president for the national nonprofit credit counseling agency Money Management International.

Again depending on the situation, the lender might opt to forego some of the lost payments altogether — a process known as forebearance — Williams said. Or they might agree to add the missed payments to the underlying loan amount, just to keep the borrower in the house. Williams said.

If none of that is possible, the lender might opt to accept a “short sale” — the sale of a house for less than its loan value — to avert full foreclosure. Or they might agree to simply let the borrower sign over their deed and walk away, leaving the bank to sell the house but, again, averting a formal foreclosure.

As long as full foreclosure is avoided, borrowers might be able to negotiate with their lender to keep any black marks from appearing on their credit records, Williams said, although that can be tough to do if a forebearance is large, or the deed is returned. A full foreclosure can remain on a borrower’s credit report for up to seven years, causing about as much damage as a bankruptcy would, Williams said.

Jeff Stenman, foreclosure manager for Bellevue, Wash.-based Northwest Trustee Services, a company that handles foreclosure actions for a variety of lenders throughout the Northwest, said his company’s caseload has about tripled since last year. But lenders are entering into more loss-mitigation deals before their foreclosures ripen — everything from refinancings to short sales — in an effort to keep a wave of troubled home buyers from washing a tide of unsold homes onto their asset sheets.

“I think everybody is trying to adjust to it, to see what they can do about it,” Stenman said. “Nobody wants to see these things go to sale. That’s for sure.”

Help

 

Help is available to guide stressed borrowers through their negotiations, and more is likely on its way.

Congress appropriated $180 million through NeighborWorks America late last year to increase the availability of mortgage credit counseling throughout the country, Snyder said.

NeighborWorks already helps fund the national 888-995-HOPE hot line run by the nonprofit Homeownership Preservation Foundation. Hot line counselors can either help callers directly or refer them to local agencies, or both.

In Deschutes County, the national network refers borrowers to mortgage counselors at NeighborImpact in Redmond, where they can work in-depth with a local counselor, NeighborImpact Executive Director Sharon Miller said.

Money Management International also maintains a national hot line and refers borrowers in Deschutes County to its local arm, Consumer Credit Counseling Services, for free help, Williams said.

The national network of NeighborWorks-affiliated counselors can help their clients do everything from creating personal financial statements to help with bank negotiations to making referrals to social service agencies who can help deal with underlying problems like health issues, substance abuse, or job loss, Snyder said.

“They really take charge with the borrowers,” he said.

The aftermath

The rise in local pre-foreclosures is driven by a mix of factors.

Failed investments account for some of it. One investor went on a buying spree from September 2006 through February 2007, county records show, taking out mortgages on 17 different properties. He stopped paying on all of them last July, leaving about $23,305 per month in unpaid mortgage payments in his wake.

Other cases, like the single mother’s home that Helikson auctioned on the courthouse steps, were driven by a combination of loans that were given out too generously at the peak of the housing boom’s price spike, a borrower’s job loss, a health problem, or some other financial setback that caused their payments to fall behind.

Whatever the case, some houses are coming back to the market.

Thirty-eight Bend-area houses were designated “short sales” on the Central Oregon Multiple Listing Service Thursday, Duke Warner Realty agent Jane Flood said, out of a total of about 1,200 listed for sale.

That generally means the homes are listed for sale at asking prices that are below the lender’s loan amount, Flood said, but that doesn’t mean they are the only homes that will ultimately sell short.

Often, GoBend Realty broker Terry Denoux said, borrowers will list their homes while a foreclosure is pending, fishing for the best deal they can find to pitch to the bank. If an offer comes in that’s higher than the loan amount, everybody wins.

If not, the borrowers may have to pitch it to the bank as a short-sale option, which must be weighed and approved by the bank’s loan loss-mitigation department before a deal can go through. Either way, he said, it may not show up on the MLS as a potential short sale if the offer price is higher than the loan, but it may end up becoming a short sale anyway.

For potential buyers, is it worth shopping in the foreclosure bin for bargains?

Maybe, Denoux said. But maybe not.

Some houses that were bought with 100 percent financing 12 to 18 months ago may have lost 10 percent of their market value since then, depending on where they are and what they are, Denoux said, so picking them up at auction at the lender’s asking price might be a mistake.

Homes sold through the foreclosure process come as-is, so it’s up to a potential buyer to dig through county records to make sure there are no other loans or liens that may cloud the title after a purchase, Stenman said. And then there’s the possibility that a house may come with a disgruntled tenant — the former owner — still in it. Or its maintenance might not have been the best.

“To a lot of people, the word foreclosure indicates, ‘Oh! Good deal! Fire sale!’” Denoux said. “And sometimes that’s not the case.”

Still, foreclosures or the threat of foreclosure have become an active segment of the market. Denoux, who advertises on RealtyTrac.com, a foreclosure tracking site, figures foreclosure-related activity accounts for about 15 percent to 20 percent of his business this year.

Flood, who contracted with RealtyTrac to send her sales leads last year, said she dropped that contract this year to concentrate more on relocation business, even though she still bills herself as a “foreclosure specialist.”

“I felt I knew everything I wanted to know about foreclosures,” Flood said. “And, you know, some of the people you couldn’t help — it was just depressing.”

David Fisher can be reached at 617-7862 or at dfisher@bendbulletin.com.

Foreclosures, Lenders' Preferred Fix - "delinquent borrowers were almost twice as likely to lose their homes as they were to reach an agreement with their lender that would allow them to stay put"

By Renae Merle
Washington Post Staff Writer
Friday, January 18, 2008; D01

At a time when mortgage lenders were touting efforts to help homeowners avoid foreclosure, delinquent borrowers were almost twice as likely to lose their homes as they were to reach an agreement with their lender that would allow them to stay put, according to a Mortgage Bankers Association survey released yesterday.

The survey provides insight into the third quarter last year, when the nation's foreclosure rate, 1.69 percent of outstanding loans, reached a historic high. The industry has since agreed to a Bush administration plan that will freeze rates for 600,000 homeowners with adjustable-rates loans. Consumer advocates have said that the plan does not go far enough in preventing foreclosures.

A top regulator yesterday said mortgage lenders are moving too slowly to modify subprime loans, which are among the most likely to default. "We must see a pickup in the pace, and the sooner the better," Sheila C. Bair, chairman of the Federal Deposit Insurance Corp., said at a conference.

The Mortgage Bankers' report found that lenders began foreclosure on 62 percent of delinquent borrowers during the third quarter and that homeowners who did get help were more likely to have their lender set up a repayment plan than to lower or freeze their interest rates.

That represents progress, association officials said, noting that the industry has modified loan terms sparingly. This was the group's first formal study of the practice.

The foreclosure rate was exacerbated by speculators, borrowers who did not respond to efforts to contact them and borrowers who defaulted on a previous repayment plan or loan modification, they said.

"The mortgage industry took major steps during the third quarter to help those borrowers who could be helped," said Jay Brinkmann, vice president of research at the Mortgage Bankers Association.

For instance, California-based Countrywide Financial, the nation's biggest mortgage lender, said this week that it had helped more than 80,000 borrowers keep their homes last year, with most receiving loan modifications and long-term repayment plans.

According to the Mortgage Bankers' report, lenders modified 9 percent of all delinquent loans, or 53,573 loans, lowering or freezing the interest rates. They set up repayment plans for 29 percent, or 182,702, allowing borrowers to stay in their homes. Lenders began foreclosure procedures on the remaining 62 percent, or 384,388 loans. Of those, 29 percent were in default despite a previous repayment plan or loan modification.

Consumer advocates said the report points to the industry's misplaced priorities. For all types of mortgages, lenders established three times as many restructured repayment plans as they did modifications, which could include lowering the interest rate. For adjustable-rate subprime loans, they established seven times as many repayment plans as loan modifications.

Lenders are "focused on short-term repayment plans that don't help people in the long run," said Ellen Schloemer, director of research at the Center for Responsible Lending. Repayment plans are "great if people have short-term income disruptions but not if they need structural changes to loan terms to make it affordable long term."

Mortgage lenders have been shifting to more modifications as the economy has stumbled and as accounting rules have made it easier for servicers to change contracts, said Bill Longbrake, senior policy adviser for the Financial Services Roundtable. "Repayment plans do work quite frequently, but they are not always the right solution," he said. "Because of current [economic] circumstances, more modifications are beginning to be done."

That shift will be illustrated in a report to be released today by the industry-backed Hope Now Alliance, which will outline the types of plans that lenders provided in the last six months of 2007, Longbrake said. The Financial Services Roundtable is part of the alliance.

Bill would make Virginia foreclosure scams a felony

dailypress.com/news/local/virginia/dp-va--xgr-mortgagescams0122jan22,0,7436882.story

       

dailypress.com

               

                                         

By LARRY O'DELL

                            

Associated Press Writer

                          

January 22, 2008

                  

RICHMOND, Va.

           

       

A man showed up on the doorstep of a woman's home and said he'd been sent by God to save the residence from foreclosure. Let's pray, he suggested. They did.

God, the man told the homeowner, wanted her to sign some papers that would halt the foreclosure. The woman signed.

As it turns out, the visitor was not God's messenger but a foreclosure rescue scam artist. The woman lost possession of her home, and the scammer made a tidy profit.

Helen O'Beirne of Housing Opportunities Made Equal of Virginia Inc. relates that sad but true story as one example of why Virginia needs a law cracking down on foreclosure rescue scams.

At HOME's behest, Del. G. Glenn Oder has introduced legislation to prohibit people from participating in or servicing foreclosure rescues for profit. A violation would be a felony.

Oder, R-Newport News, said he is working with the lenders, real estate investors, HOME and other stakeholders to ensure that the legislation doesn't unwittingly outlaw legitimate efforts to help financially squeezed homeowners.

"Your bank might want to provide you an opportunity to get your feet back underneath you," Oder said. "We want to make sure we don't stop them--that the bill doesn't have any unintended consequences."

The bill likely will be considered by a House of Delegates committee next Tuesday. It's one of several introduced in the 2007 General Assembly as a result of problems in the housing market, including the subprime mortgage collapse that has led to a spike in foreclosures.

According to HOME, there were 13,200 foreclosures in Virginia during the first eight months of 2007 compared to 4,350 for the entire previous year.

"We've seen an increasing number of people coming in with awful mortgages, and they've gotten caught up in these scams when they're most vulnerable," O'Beirne said.

"As soon as the foreclosure process starts, their address is in the paper," she said. "They get inundated with mailings, phone calls, people showing up at the door asking them to sign huge stacks of paperwork in exchange for empty promises."

One of the most common foreclosure rescue scams is a lease-buyback arrangement, according to HOME. The troubled homeowner surrenders title with the aim of renting the home and buying it back later. But the rent is usually so high that the deal is unworkable, and the homeowner loses the property to the "rescuer."

Another scam is a version of the old bait-and-switch. The homeowner believes he's just getting a new loan to bring his payments current but is duped into signing over the deed, surrendering possession of the property.

In a third common rescue scam, the scammer charges upfront fees for services they either don't perform, that the homeowner can do for himself, or that a nonprofit organization can offer. Such services might include negotiating with lenders or taking steps to improve the homeowner's credit score.

O'Beirne said several other states have enacted laws targeting foreclosure rescue scams, and she expects broad support for Oder's.

"People see these signs all over telephone poles" advertising foreclosure rescues, she said. "They realize the foreclosure rate is through the roof."

Del. Sal Iaquinto, R-Virginia Beach, also has introduced legislation addressing the problem. His bill would require foreclosure rescuers to fully disclose their services, allow homeowners to rescind a contract and authorize the attorney general to enforce violations.

Iaquinto's bill is well-intended but does not go as far as Oder's, which is modeled after a Massachusetts law, O'Beirne said. She said the two bills may be merged before reaching the House floor.

The bill is HB408

   

       

Copyright © 2008, Newport News, Va., Daily Press